The European Union (EU) reached an agreement on Friday on a price cap for Russian petroleum products, the Swedish EU Presidency announced, two days before the start of a European embargo on these products.
“EU ambassadors today approved the price cap for Russian petroleum products before final adoption by the European Council,” Swedish officials tweeted on behalf of their country, which holds the rotating presidency of the Union. It is an “important agreement which is part of the continued response of the European Union and its partners to the Russian war of aggression against Ukraine”.
The Swedish presidency did not detail the ceiling prices contained in the agreement. Further information is expected later Friday evening.
The European Commission had proposed that, in transactions between Russia and third countries, the price of “premium” refined products (sold at a higher price than crude oil, such as diesel or kerosene) be capped at 100 dollars per barrel, and that of heavy products (fuel oil, etc.) at 45 dollars per barrel, according to a diplomatic source.
But according to diplomatic sources, Poland and the Baltic states were demanding an even lower level of the ceiling to further penalize Moscow.
The equation is delicate, however, the objective being – as with the cap on crude oil adopted in December – to restrict Russia’s income while ensuring that it continues to supply the world market so as not to destabilize trade. and cause a surge in prices.
The diversity of the petroleum products concerned, whose selling price varies enormously from one market to another, also complicates the situation.
The European embargo on Russian refined products “will further unbalance international energy markets”, Russian presidential spokesman Dmitry Peskov warned on Friday, assuring that Moscow “was taking measures to cover [ses] interests”.
According to an agreement reached in December by the EU, the G7 powers and Australia, these cap levels must be adopted before the entry into force on Sunday of the European embargo on Russian refined products exported by sea, to to prevent Moscow easily finding new buyers elsewhere at market prices.
Beyond the ceiling set by the Europeans, it will be prohibited for companies based in the EU, the G7 or Australia to provide the services allowing maritime transport, in particular insurance (the G7 countries providing some 90% global shipments).
Following in the footsteps of the United States and Canada, the EU has already banned since December 5 on its soil almost all deliveries of Russian oil transported by sea.
To this was added simultaneously a price cap mechanism approved by the EU, the G7 and Australia, providing that, worldwide, only Russian crude sold at a maximum of 60 dollars per barrel can continue to be delivered. Beyond that, companies based in these countries can no longer provide their services (trading, freight, insurance, shipowners, etc.) under penalty of sanctions.